Strategic Management of Resources

Session 1
Aligning Resources
with Strategic Plans
Strategic Management of Resources
Session 1: Aligning Resources with Strategic Plans
Session 2: Choices Affecting Structure
Session 3: Choices Affecting Infrastructure
Session 4: Configuring and Integrating
Operating Processes
Session 5: Supply Chain Management
Session 6: Configuring and Integrating Design and
Development and Cost Management Processes
Session 7: Project Management
Session 8: Measurement Management
Session 9: Change Management

Strategic Management of Resources, ver. 1.2—October 2002

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Objectives of Session 1

Recognize the need for integration of the
manufacturing process with the company strategy

Identify considerations to make in developing the
strategy

Understand organizational strategy selection

Explain how resources can be aligned with
strategic market objectives

Determine the importance of customer
requirements in product design and development

Describe the strategic importance of Just-in-Time
(JIT) and total quality management (TQM)

Strategic Management of Resources, ver. 1.2—October 2002

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Principle of Competitive Exclusion

“No two species can coexist

that make their living in the
identical way.”

—Professor G.F. Gause

Strategic Management of Resources, ver. 1.2—October 2002

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Strategy (Strategic Plan)

The plan for how to marshal and

determine actions to support
the mission, goals,and
objectives of an organization.
Generally includes an organization’s
explicit mission, goals, and
objectives and the specific actions
needed to achieve those goals and
objectives.
— APICS Dictionary, 9th ed.

Strategic Management of Resources, ver. 1.2—October 2002

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Considerations in Developing Strategy Components

 Development of time horizons


Identification of key events
 Development of distinctive competence
 Creation of a competitive advantage

Flexibility of decision patterns
 Transformation of inputs into value-added
outputs

Commitment of necessary resources

Strategic Management of Resources, ver. 1.2—October 2002

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Strategic Planning Model
ics Ne w
o nom Tec
hn
Ec ol
og
an Short/Long Fi na
Pl Facilities nc

y
s Term Planning
on Unit Plan
Plan

ia
i
at
Capability

l
n

er

Pl
titio Plan Controls

Op

an
Plan

Cu s
e

Operations Financial
Comp

Strategy Strategy

tomer Require
Directions
Corporate Plan
Critical
and
Skills
Business Market
Plan Strategy Segment
Plan
Product
Marketing
lan

Production Development
ies

Market

M
Generation Strategy
tP

Strategy

a
Plan Niches

m
rke
c

en

Plan
en

e
tin
m

nt
Production
op

g
g

Competitive

s
Technology

Pl
A

el

v Market Analysis an
Plan
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De Shares Plan
or

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r odu la
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P
gu Ex
Re ter
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actors

Source:Hayes, Robert H., Steven C. Wheelwright, and Kim B. Clark, Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission.

Strategic Management of Resources, ver. 1.2—October 2002

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A Corporate Strategy Model

Vision

Mission

Organizational Objectives

Environmental Scanning

Internal Strength and Weakness Analysis

Corporate Strategy

Strategic Management of Resources, ver. 1.2—October 2002

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Typical Strengths and Weaknesses
Function Strengths Weaknesses

Marketing Strong salesforce Insufficient salesforce

Excellent distribution Poor forecasting
Excellent marketing
information

Finance/ Excess cash Using wrong cost system

Accounting Large line of credit Heavily leveraged
Excellent cost No timely reporting
information
Wall Street rating

R&D/Design Experienced designers Insufficient R&D spending

Patent protection

Strategic Management of Resources, ver. 1.2—October 2002

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 Business Strategy Approaches
Three possible strategies for competitive
distinction
 Price leadership
– Low-cost operations
– Effective supply chain management
– Standardized off-the-shelf products
– Standardized processes
 Product differentiation
– High-quality products
– Easily adaptable processes
 Focus toward a particular customer
– Responsive delivery, process flow
– Customized for targeted market segment

Strategic Management of Resources, ver. 1.2—October 2002

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Operations Strategy
“The content and process of activities,
directed toward distinctive operations
competence, that evaluate potential impacts
of situations and alternatives in structured
time dimensions and integrate a pattern of
decisions to balance the resource
commitments, output requirements, and risk
in various focused transformation efforts”

Source: Stonebraker, Peter W. and G.Keong Leong , Operations Strategy, (Prentice-Hall, 1994). Reprinted with permission of Prentice-Hall..

Strategic Management of Resources, ver. 1.2—October 2002

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Four Elements of Operations Strategy

Method for evaluating the impact of
activities
 Definition of time dimensions
– Time horizon
– Time fences
 A mechanism for integrating
decisions

Transformation efforts

Source: Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing, (The Free Press, 1988). Reprinted with permission of The Free Press.

Strategic Management of Resources, ver. 1.2—October 2002

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Focus of an Operations Strategy
 Process-focused strategy
– Wide range of customized products or
services at low volumes
 Product- or service-focused strategy
– Narrow range of standardized products
or services at high volumes
 Customer-focused strategy

Strategic Management of Resources, ver. 1.2—October 2002

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Strategy Development Approaches
 Overview approach  Reductionist approach
– Identify several core – Identify root causes
strategic focuses – Reduce effects
– Make a checklist 
Sequential approach
– Focus on one or two
issues – Address competitive
priorities one at a time
 Trade-off approach
– Build upon foundation
– Identify most important
priority
variables and contributing
factors
– Identify interaction and
possible impacts
Source: Stonebraker, Peter W. and Leong G.Keong, Operations Strategy, (Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.

Strategic Management of Resources, ver. 1.2—October 2002

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Strategic Planning Model
no mics New
Tec
o
Ec hn
ol
og
an Fi
Pl Facilities Short/Long na
s nc

y
Term Planning
on Unit Plan
Plan

i
at

ia
ion
Capability

er

lP
Plan Controls

Op

lan
etit
Plan

C us
Comp

Operations Financial
Strategy Strategy

tomer Require
Directions
Corporate Plan
Critical
and
Skills
Business Market
Plan Strategy Segment
Plan
Product
n

Production Development Marketing

P la
cies

Generation Strategy Market

M
Plan Strategy

ark
Niches
t
en

m
Plan
n

e
m

e
ge

tin
p

nts
Production Competitive
o

g
yA
el

Technology

Pl
v Market Analysis an
De Plan Plan
Shares
o r

t
duc t Plan
ro la P
egu Ex
R tern
al F ac tors

Source:Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission of
Prentice-Hall.
Strategic Management of Resources, ver. 1.2—October 2002

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Operations Strategy
Corporate Strategy
Focus: Survival

Business Strategy
Focus: Distinctive competence in the field
• Cost leadership
• Product differentiation
• Focus (cost or differentiation)

Manufacturing Operations Strategy Other Operations

Strategies
Focus: Competitive Strategies
Marketing
Cost Flexibility Quality Delivery Finance
Human Resource
Engineering

Policy

Service-enhanced product or delivered service Satisfied customer

Source: Stonebraker, Peter W. and Keong Leong, G., Operations Strategy (Boston: Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.

Strategic Management of Resources, ver. 1.2—October 2002

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A Firm Can Compete On

Price
Quality
Delivery

Flexibility

Time

Product Design Service

Strategic Management of Resources, ver. 1.2—October 2002

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 Competitive Advantage Categories
Order Winners Qualifiers Nonissues

Characteristics that Characteristics you Characteristics that do

make your customers need to get into the not enter into the
prefer you over game competitive picture for
competitors that market niche

Source: Hill, Terry, Manufacturing Strategy, (Irwin McGraw-Hill, 1994). Reprinted with permission of Irwin McGraw-Hill.

Strategic Management of Resources, ver. 1.2—October 2002

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 Determinants of Industry Attractiveness
Threat of new
entrants

Bargaining Bargaining
power Rivalry among power
of suppliers existing of buyers
competitors

Threat of substitute
products or services
Source: Porter, Michael E., and Victor E. Millar, How Information Gives You Competitive Advantage (Harvard Business Review Strategic Management of Resources APICS Readings
APICS, 2000.
Strategic Management of Resources, ver. 1.2—October 2002

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Total Quality Management
“An effective system for integrating the quality
development, quality maintenance, and quality
improvement efforts of the various groups in an
organization so as to enable production and service
at the most economical levels which allow for full
customer satisfaction”
—Armand Fiegenbaum
Quality

Strategic Management of Resources, ver. 1.2—October 2002

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Approaches to Quality MPTUV
 Transcendent quality is an ideal, a condition
of excellence
 Product-based quality is based on a product

attribute
 User-based quality is fitness for use

 Manufacturing-based quality is conformance

to requirements
 Value-based quality is the degree of

excellence at an acceptable price

Strategic Management of Resources, ver. 1.2—October 2002

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Quality Function Deployment

A methodology designed to ensure that

all the major requirements of the
customer are identified and
subsequently met or exceeded through
the resulting product design process and
the design and operation of the
supporting production management
system.
Source: APICS Dictionary, 9th Ed. 1998

Strategic Management of Resources, ver. 1.2—October 2002

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 This visual has been
deleted. The numbering
sequence has not been
changed.
--The Committee
Strategic Management of Resources, ver. 1.2—October 2002

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Internal and External Customers

Organization
Process
Output
Internal Customer

Process
Output
Internal Customer

External Customer
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Quality Costs

 Internal failure costs

 External failure costs

 Appraisal costs

 Prevention costs

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Quality at the Source
 Companywide involvement
 Employee empowerment


Development of world-class suppliers

Prevention orientation
 Employee morale/attitudes

Strategic Management of Resources, ver. 1.2—October 2002

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Strategic Importance
 One way to achieve competitive advantage
 Customer focused and customer driven

Necessary for survival and competitive
advantage
Customer

Overall Business Strategy

JIT TQM
Strategic Management of Resources, ver. 1.2—October 2002

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Definition of JIT
JIT is a philosophy of operations based
on planned elimination of all waste and
on continuous improvement of
productivity. It encompasses the
successful execution of all manufacturing
activities required to produce a final
product or service, from design
engineering to delivery, including all
stages of conversion from raw material
onward.
Source: APICS Dictionary, 9th Ed. 1998

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Important Concepts of JIT

Elimination of Waste Respect for People

Customer

Continuous Improvement Focus on Customer

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Lean and JIT Similarities
 Based on the Toyota production system
 Focus on value as defined by the customer


Focus on eliminating all forms of waste

Employ total quality management tools
 Employ continuous improvement

Strategic Management of Resources, ver. 1.2—October 2002

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 This visual has been
deleted. The numbering
sequence has not been
changed.
--The Committee
Strategic Management of Resources, ver. 1.2—October 2002

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 This visual has been
deleted. The numbering
sequence has not been
changed.
--The Committee
Strategic Management of Resources, ver. 1.2—October 2002

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 This visual has been
deleted. The numbering
sequence has not been
changed.
--The Committee
Strategic Management of Resources, ver. 1.2—October 2002

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Benefits of JIT
 50-90% reduction in throughput times

50-90% reduction in work in process

60-80% reduction in scrap and rework
 50-90% reduction in setup times

 30-60% reduction in manufacturing space

required

Source: Sandras, W. A. Jr., Just-in-Time: Making It Happen (Unleashing the Power of Continuous Improvement.), (John Wiley and Sons, 1989.) Adapted with
permission of John Wiley and Sons.
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Benefits of JIT (cont.)

 20% increase in shipments

 40% reduction in space utilization


33% reduction in labor standards

Source: Hall, Robert W., Attaining Manufacturing Excellence, (Dow Jones-Irwin, 1987). Adapted with permission of Dow Jones-Irwin.

Strategic Management of Resources, ver. 1.2—October 2002

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Benefits of JIT (cont.)
Improved Reduced
Quality Inventory
Productivity Lot sizes
Service Lead times
Capacity Unit costs
Standardization Design time
Transport Systems Space
Flexibility Energy
Source: Wantuck, K.A., Just in Time for America, (KWA Media, 1989). Adapted with permission of KWA Media.
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Objectives of JIT

 To gain a competitive advantage

 To improve responsiveness to customers


To achieve perfect quality

To improve quality of work life
 To improve flexibility

 To improve resource productivity


To use time-based management

To reduce product cost
Strategic Management of Resources, ver. 1.2—October 2002

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